What is cryptocurrency Zcash (ZEC) and how does it work?

What Is Zcash (ZEC)?

With the success of Bitcoin, the gates opened for hundreds of alternative cryptocurrencies (altcoins) – including Zcash (ZEC). Zcash was founded in Oct 2016 by a team of scientists led by Zooko Wilcox-O’Hearn in response to demands from the blockchain community for an open financial system with additional privacy features. 

Zcash was created as a decentralized and open-source cryptocurrency that offers privacy and security for users’ financial history. Transactions can be confirmed quickly and efficiently on the Zcash network as ZEC is built on Bitcoin’s original codebase. While Bitcoin and other cryptocurrencies expose user’s financial history and current holdings when making transactions, Zcash has shielded transactions that obfuscate a user’s personal information. 

While Zcash has been criticized for potentially providing a haven for illegal transactions, the goal of the Zcash Foundation is to protect users’ privacy for legitimate, non-nefarious reasons.

How Does Zcash (ZEC) work? 

Zcash is a privacy-protecting digital currency built using complex math and computer science to deliver high-tech security. Zcash allows users to send transactions through the network efficiently, easily, and with low fees. Users who may want additional privacy can take advantage of Zcash’s shielded transactions. Using shielded transactions can keep users’ personal information private.

Private transactions are possible due to the unique structure of Zcash. Zcash addresses are either private Z-addresses or public T-addresses. The privacy of the transaction depends on what type of address is used and what type of address the value is sent to.

A Z-to-Z transaction appears on the public blockchain, so users can see that it did occur and fees were paid. However, the addresses, transaction amounts, and memo fields are all encrypted and not publicly visible. A user may choose to disclose this information with trusted third parties through the use of view keys and payment disclosure.

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Z-to-Z transactions are only possible due to the use of Zero-Knowledge Proofs or Zk-SNARKs.

Zk-SNARKs allow transactions in ZEC to be fully encrypted on the blockchain but still verifiable as valid transactions. They work by allowing a user to prove possession of certain information, e.g. a secret key, without revealing that information, and without any additional transactions between the two parties.

A T-to-T transaction works just like Bitcoin. All details of the transaction are public. The two Zcash address types are interchangeable and funds may be sent between either type. Additional information on cross wallet transfers can be found inside Zcash’s (ZEC) official guide.

Who Are the Founders of Zcash? (History of ZEC)

In 2013, Matthew Green, Ian Miers, and Christina Garman from Johns Hopkins University came up with Zerocoin, a proposed privacy extension to Bitcoin. Indecisive community response and a desire to move quickly prompted the team to recruit additional scientists to build a standalone protocol: Zcash. The Zerocoin Electric Coin Company (now Electric Coin Company) was formed in 2015 and led by its founder Zooko Wilcox-O’Hearn to help engineer and deliver the idea, and the Zcash Foundation was launched in 2017 to ensure the network’s continued development.

What Makes Zcash (ZEC) Unique?

Unlike the pseudonymity of Bitcoin and most other cryptocurrencies, Zcash offers privacy and true anonymity for users and their transactions. 

Most digital cryptocurrencies that provide anonymity rely on private keys which can make it easier to identify a user after enough transactions have been made. Since ZEC uses Zk-SNARKs instead, that means that users never need to reveal their addresses to each other, greatly reducing the amount of information that can be exposed.

What Gives Zcash (ZEC) Value?

ZEC retains a number of the properties – such as decentralization – that give BTC value. Unlike BTC, though, ZEC is a much better representation of digital cash.

Just like BTC, there is a hard cap on the total supply of ZEC set at 21 million. 

New ZEC is mined through proof-of-work (PoW), with mining reward halvings happening at different intervals.

In addition to everything that makes Bitcoin an attractive investment, ZEC derives some added value from its additional privacy features.

How Many Zcash (ZEC) Coins Are in Circulation?

Zcash (ZEC) has a circulating supply of 10,922,059 with a total maximum supply of 21,000,000 ZEC tokens. This supply will never increase. 

ZEC tokens can be earned by miners who maintain and manage the network. Zcash did not have an ICO. Instead, the founders elected to extract a fee from the mining rewards. Over time, 10% of all ZEC (2.1 Million) produced will go to the founders. 

How Is Zcash (ZEC) Secured?

Zcash uses a proof-of-work consensus mechanism. Zcash will never use another consensus mechanism to secure the network. Zcash miners secure the network by solving computationally difficult puzzles in order to produce blocks.

As long as every miner or node on the network agrees on the order in which the blocks have produced the state of all the information is recorded and the network proceeds to the next block. This consensus mechanism prevents attacks by requiring malicious actors to control a large portion of the network. 

The objective of proof of work is to extend the chain and miners are incentivized to continue to do this work on the Zcash chain. There isn’t much incentive for miners to start their own chain since users will always choose the longest or “official” chain. However, due to contention over development and disagreements on the roadmap forks have occurred such as Ycash.

Other Technical Data

Fork – when a network splits into two separate networks once a large enough number of miners decide to adopt new rules.

Proof of Work (PoW) – miners compete to solve a piece of data that is difficult to produce but easy for others to verify.

ICO – initial coin offering. A process or event in which a company attempts to raise capital by selling a new cryptocurrency. 

How To Use Zcash (ZEC)

Though ZEC functions the same as Bitcoin currently, users who want to run a node or transact on the Zcash network will need the appropriate Zcash software. 

The major use for Zcash currently is moving value on ZEC’s L1 network. Zcash is also attractive because of ZEC’s ability to move funds privately and keep personal financial information hidden with the native ZEC tokens. Additionally, ZEC can be used as a speculative investment tool and a form of payment.

How To Choose a Zcash (ZEC) Wallet

The type of Zcash (ZEC) wallet you choose will likely depend on what you want to use it for and how much you need to store.

Hardware wallets or cold wallets provide the most secure option with offline storage and backup. Both Ledger and Trezor hardware wallets offer storage solutions for ZEC. Hardware wallets can involve a bit more of a learning curve and are a more expensive option, however. As such, they may be better suited to storing larger amounts of ZEC for more experienced users.

Software wallets provide another option and are free and easy to use. They are available to download as smartphone or desktop apps and can be custodial or non-custodial. With custodial wallets, the private keys are managed and backed up on your behalf by the service provider. Non-custodial wallets make use of secure elements on your device to store the private keys. While convenient, they are seen as less secure than hardware wallets and may be better suited to smaller amounts of Zcash (ZEC) or more novice users.

Online wallets or web wallets are also free and easy to use, accessible from multiple devices using a web browser. They are considered hot wallets and can be less secure than hardware or software alternatives, however. As you are likely trusting the platform to manage your ZEC, you should select a reputable service with a track record in security and custody. As such, they are most suited for holding smaller amounts or for more experienced frequent traders.

Kriptomat offers a secure storage solution, allowing you to both store and trade your Zcash (ZEC) tokens without hassle. Storing your ZEC with Kriptomat provides you with enterprise-grade security and user-friendly functionality.

Selling and buying ZEC, or exchanging them for any other cryptocurrency, is done in mere moments when you choose our secure platform as your storage solution.

Zcash (ZEC) Mining

Zcash does not support staking. Instead, it utilizes a proof-of-work (PoW) consensus similar to Bitcoin.

Zcash utilizes a different mining algorithm than Bitcoin. Zcash’s algorithm is called Equihash, and it requires the use of custom-designed ASIC miners in order to be mined efficiently. Most users opt to lend their computational power to a mining pool in order to receive regular rewards unless they have a large number of ASIC miners all working in tandem.

Conclusion

Zcash is a well-established cryptocurrency that has encountered and passed numerous obstacles. It offers a unique value proposition in terms of privacy, which many investors may like. 

By allowing users to transact and conduct their business privately Zcash has made cryptocurrency more accessible than ever before to users who value secure and private transactions. 

Zcash (ZEC) FAQ

Is ZEC a Competitor to Bitcoin?

Yes. Zcash (ZEC) is designed to compete directly against the Bitcoin network by pursuing a different path of development while using the same source code. Zcash offers additional features in stark contrast to Bitcoin such as privacy.

When Will Staking Be Released?

Zcash uses Proof-of-Work, not Proof-of-Stake, and will never support it.

How To Buy Zcash (ZEC)

Buying ZEC is as easy as visiting Kriptomat’s how to buy ZEC page and choosing your preferred method of payment.

How To Sell Zcash

If you already own ZEC and hold it on a Kriptomat exchange wallet, you can easily sell ZEC coins by navigating the interface and choosing your desired payment option.

Zcash Price

Several factors influence Zcash price & market cap, including exchange inflows and outflows, sentiment, technical and fundamental developments, the news cycle, and the general economic environment.

Like Bitcoin, the price of ZEC is decided at any given moment by the cumulative buying and selling of millions of participants worldwide. You can keep up to date on the latest price action and news using crypto exchanges like Kriptomat or one of the many different cryptocurrency tracking services.

The current Zcash (ZEC) price is EUR.

The 24-hour trading volume of ZEC is EUR. ZEC is currently ranked of all cryptocurrencies by total market capitalization, with a market cap of EUR. It has a circulating supply of ZEC.

Register now to begin your journey into the world of Zcash and cryptocurrencies with Kriptomat!

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